If you ever need to replace your job income, money from government or workplace programs can be a good starting point. But it may not be enough. If you take steps to plan now, it will be easier to get through times when you don’t have income.
Here are four ways you can take care of your debts, or fill in income gaps while you are unable to work:
- Insure your credit card and personal loans.
- Buy disability insurance or critical illness insurance.
- Build an emergency fund or other savings.
- Borrow money wisely.
If you do have to borrow, keep these points in mind:
- Try to put off purchases for as long as you can. The less you borrow, the less interest you have to pay back.
- Try not to use your credit cards. The interest rates are high, making this one of the most costly ways to borrow.
- Avoid payday loans and cheque cashing companies, where interest rates and fees can be even higher. For more information on these types of loans, review The Cost of Payday Loans report from the Financial Consumer Agency of Canada.
Learn more now about replacing your income if you are unable to work.
These two stories illustrate some of the tough decisions families have to make to protect their incomes. They may help you think about what’s important to you.
Protecting your income: Trent and Trisha's story
Trisha is taking time off from work while the children are young, so their family will depend on Trent’s income. They worry about how they would pay their bills if something happened to Trent. To learn how they decide to protect his income, read Trent and Trisha’s story.
Saving up for hard times: Camille and Calvin's story
Camille and Calvin consider buying insurance to protect their car loan and mortgage, but decide instead to save the money insurance would have cost them in an emergency fund. To learn how this strategy worked out for them, read Camille and Calvin’s story.
Remember: If you plan ahead, it will be easier to handle changes in your income.
For some people, the answer may be some sort of insurance. In any case, it’s important to think through your choices with care, based on your age, state of health, personal situation, other savings, and the length of time you need the insurance.